TaxTMI 
TaxTMI 
2014 (12) TMI 571
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....eriod expenditure, disallowance of commission payment, royalty payment claimed in computation, compensation paid for premature termination of job work contract, non-competence fee and note on the claim of depreciation on non-compete fees, the revised total income was computed on 28.3.2005. Since the issue in this appeal is specific only to the disallowance of the claim of royalty and not on other issues, we propose to extract the relevant portions of both the explanation of the assessee dated 14.3.2005 and the scrutiny assessment order dated 28.3.2005 of the original authority, for better clarity on the said issue, as follows:- ''Explanation dated 14.3.2005 of the assessee 3. With respect to Royalty, in AY 2002-03 an amount of Rs. 1,12,29,927 was inadvertently claimed in computation as a deduction of income. Order of the original authority dated 28.3.2005 7. Royalty payment claimed in computation It is seen from the computation of income that the assessee in the computation of income has claimed deduction of royalty of Rs. 3,14,45,154/-. It was explained to me that the royalty is paid to M/s Bayer AG Germany under the agreement. In case no TDS is paid during ....
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....lty proceedings under Section 271(1)(c), by order dated 23.10.2008, holding as follows:- ''5.As regards disallowance of Royalty payment of Rs. 1,12,29,927/-, the assessee's submission that it had withdrawn the wrong claim voluntarily is not correct. It was the Assessing Officer who had called for the TDS details vide this office letter dated 10.3.2005 which was received by the assessee's AR on the same day. Only upon receiving this letter, the assessee vide its letter dated 14.3.2005 admitted the mistake and agreed for the addition. Hence, it was not voluntary as claimed by the assessee. 6. Thirdly, the Supreme Court while dealing with provisions of explanation 4 to Section 271(1)(c), in the case of Virtual Soft Systems Ltd vs CIT has held that there should be a positive income to levy penalty u/s 271(1)(c) prior to 1.4.2003 in view of the amendment brought in by the Finance Act, 2002. However, in its subsequent decision, the Supreme Court in the case of CIT vs Gold Coin Health Food Pvt Ltd (304 ITR 308) has overruled its own decision in the case of Virtual Soft System Ltd vs CIT referred supra. In the referred case, the SC has observed that ''even dur....
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....ror was unearthed during the course of assessment proceedings under Section 143(3) of the Act on a scrutiny by the assessing officer, failing which the error would not have surfaced leading to loss of revenue. It further held that since the assessee did not take proper care to furnish accurate particulars of income, the decision of the Supreme Court relied upon by the Revenue clearly justified the levy of penalty and taking a lenient view would encourage the assessee to perpetuate such mistakes and therefore the levy of penalty amounting to Rs. 40,09,083/- being 100% of tax on Rs. 1,12,29,927/- for claiming deduction twice on the ground of payment of royalty, was absolutely justified. Hence, the present appeal has been filed by the assessee. 4. Heard the learned counsel for the appellant and the learned standing counsel for the respondent. 5. The learned counsel for the appellant was at pains to point out that even at the first instance the assessing officer, under the guise of scrutiny and assessment, called for certain details in letter dated 10.3.2005, for which a reply was given on 14.3.2005 admitting the mistake as inadvertent and when there was no mala fide intention on....
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....tive work and to make amicable settlement with the income tax department. Statute does not recognize those types of defences under the Explanation 1 to section 271(1)(c) of the Act. It is trite law that the voluntary disclosure does not release the assessee from the mischief of penal proceedings under section 271(1)(c). The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty. [para 7] The surrender of income on this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the st....
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.... been claimed and allowed as deduction to the assessee in the earlier years. Thereafter, when the assessee was further questioned, with a cryptic reply by way of the letter dated 14.3.2005, no cogent and reliable evidence were shown by the assessee, as such a huge amount could not have been claimed as deduction by inadvertence for the second time. The said plea has also been repelled by the Supreme Court in MAK Data (P) Ltd case (supra), as the assessee should first show by cogent and reliable evidence that there was neither concealment of particulars of income nor furnished inaccurate particulars of income. We find that the plea taken by the assessee in the letter dated 14.3.2005 is only cursory and does not give any acceptable explanation for the wrong computation, as the error was detected by the original authority only during the proceedings under Section 143(3) and she has also recorded a categorical finding that the assessee suppressed the income by making a wrong claim of royalty payment, which actually pertained to earlier assessment years, which was claimed and allowed and therefore thought it fit to levy penalty under Section 271(1)(c) of the Act. 9. The decision of th....